The changing landscape for latent and special risk claims

Two decisions of Australia’s highest court have clarified and reshaped the legal framework governing institutional liability for historical harm claims. Together, these developments materially alter how liability may arise for organisations entrusted with the care, supervision or authority over children and other vulnerable people, with important implications for insurers and claims professionals managing latent and special risk exposures.

Redefining the boundaries of vicarious liability

In a recent ruling, Bird v DP (a pseudonym) [2024] HCA 4, the High Court confirmed that vicarious liability under Australian common law remains confined to genuine employer–employee relationships. The Court made clear that liability cannot be attributed to an organisation for serious wrongdoing carried out by an individual where no such employment relationship exists.

This clarification narrowed the scope for claimants to rely on vicarious liability in historical matters involving individuals engaged in non‑employment roles, such as volunteers, clergy or contractors. As a result, the nature of the legal relationship between an organisation and the individual concerned has become a critical threshold issue when assessing whether vicarious liability can be established.

Expansion of direct institutional responsibility

The liability landscape shifted again in a subsequent decision, AA v The trustees of the Roman Catholic Church for the Diocese of Maitland-Newcastle [2026]  HCA 2), which examined whether an organisation could be directly responsible for harm arising from the conduct of a delegate, even where vicarious liability could not be established.

The Court confirmed that organisations entrusted with the care, supervision or authority over children may owe a non‑delegable duty of care. Importantly, the Court held that this duty may be breached by serious misconduct carried out by a delegate, provided the harm was foreseeable and arose from the exercise of authority or functions conferred by the organisation.

In clarifying the scope of this duty, the Court identified key considerations, including whether:

• the organisation assumed responsibility for the safety and wellbeing of the child;
• the risk of harm was reasonably foreseeable; and
• the harm arose from authority or responsibility delegated by the organisation.

This marked a significant development in Australian law by expanding direct institutional responsibility beyond traditional negligence concepts and allowing liability to arise independently of employment status.

Implications for risk and claims management

Taken together, these developments draw a clearer distinction between vicarious liability, which remains anchored to employment relationships, and direct institutional responsibility, which may arise through non‑delegable duties of care.

For insurers, claims professionals and organisations managing historical and latent risk exposures, this shift materially alters the risk profile. Claims may increasingly turn on whether an organisation assumed responsibility for care, supervision or authority, rather than on formal employment arrangements alone. This has direct implications for underwriting approaches, policy interpretation, reserving practices and the long‑term management of latent and special risk portfolios.

Key takeaways for insurers:

• Employment status is no longer the sole driver of exposure
  While vicarious liability remains limited to employer–employee relationships, liability may still arise through direct duties of care, even where individuals involved were not employees.
• Expanded exposure arising from assumed responsibility
  Organisations that assume responsibility for the care, supervision or authority over vulnerable persons may face direct liability for serious misconduct carried out by delegates, volunteers or other non‑employees.
• Increased focus on institutional role rather than individual actions
  Claims assessment is increasingly centred on whether responsibility for safety and oversight was assumed, rather than on the specific conduct or status of individuals alone.
• Heightened sensitivity for long‑tail and legacy claims
  The expansion of direct institutional liability has implications for historical exposure, particularly for insureds with long‑standing reliance on delegated authority structures, contractors or volunteers.
• Greater scrutiny of policy wordings and risk assumptions
  These developments reinforce the need for careful consideration of coverage triggers, aggregation, reserving assumptions and long‑term risk modelling across latent and special risk portfolios.

Our expertise

In this evolving legal environment, navigating historical abuse, latent injury and other special risk claims requires deep technical knowledge, sensitivity and strategic claims management. Our specialist teams bring extensive experience in managing complex institutional liability matters across multiple jurisdictions. Drawing on a multidisciplinary approach that combines legal insight, forensic investigation, policy interpretation and stakeholder management, we support insurers and organisations in responding to these claims with rigour and care. As the legal framework continues to develop, our experts are well-positioned to help clients assess exposure, manage emerging risks and deliver consistent, defensible outcomes in this highly specialised and evolving area of claims management.